Most people who buy a business in London pay for it with a mix of lender finance, seller finance and their own cash. There is no single best route. The right mix depends on the price, the target’s profits and how much security you can offer. This guide covers the UK options, including the Growth Guarantee Scheme and Start Up Loans, and what a purchase really costs. US-only schemes such as SBA loans, which the earlier version of this page covered, do not apply in the UK.
It sits alongside our guides to buying a business in London, the top industries for businesses for sale in London and the benefits of buying an established business in London. Here we focus on one question: how do you pay for it? This is general information, not financial advice.
Key takeaways
- London has the most private sector businesses of any UK region: about 1.04 million in 2025, so there is plenty of choice for buyers.
- Most deals combine lender debt, seller finance and a cash deposit. Commercial guides put the deposit anywhere from 10% to 50% of the price, depending on the deal.
- The Growth Guarantee Scheme gives lenders a 70% government guarantee, but you stay 100% liable and may be asked for a personal guarantee.
- Start Up Loans are capped at £25,000 at a fixed 7.5% a year, so they suit small purchases only.
- Budget for costs beyond the price: legal and due diligence fees, 0.5% stamp duty if you buy shares, and working capital.
Why London is a deep market for buyers
The Department for Business and Trade estimated 5.7 million private sector businesses in the UK at the start of 2025. London had the most of any region, at 1.042 million. It also had the largest numeric rise in a year (up 59,000) and the highest density, at 1,436 businesses per 10,000 adults (DBT Business Population Estimates 2025). More businesses means more potential targets, but also more sellers competing for lender attention, so a clear funding plan helps.
Your main financing routes at a glance
Most UK buyers use more than one route. The table sets out what each is generally used for and what to check first.
| Route | Typically used for | Key facts | Watch out for |
|---|---|---|---|
| Bank or specialist acquisition loan | The bulk of the price when the target has steady profits | Lenders assess affordability, security and your track record. Terms vary by lender | Fees, personal guarantees and covenants |
| Growth Guarantee Scheme (via accredited lenders) | Helping a lender say yes when security is thin | 70% guarantee to the lender; up to £2m per business group; minimum £25,001 for term loans | You remain 100% liable; personal guarantees may be taken (not your main home) |
| Start Up Loans | Small purchases or a first business | £500 to £25,000; unsecured; fixed 7.5% a year; 1 to 5 years; free mentoring | The business must be under 5 years old; the cap is low for most purchases |
| Seller finance or earn-out | Bridging a price gap and keeping the seller involved | Part of the price is paid later, from future profits or in instalments | Needs clear legal terms; the seller may want security |
| asset finance or invoice finance | Equipment, vehicles, or funding against unpaid invoices | Secured on the assets or invoices being financed | Only covers specific assets or sales, not the whole price |
| commercial mortgage | Buying a business that comes with its premises | Secured on the property | Valuation, deposit and repayments tied to the property |
| mezzanine finance or outside investors | Larger deals or a funding gap above senior debt | Sits between debt and equity, or gives up part of the ownership | Higher cost or loss of control |
Bank and specialist lenders
Business loans remain the usual starting point. The British Business Bank reports that gross SME bank lending rose 9% to £68 billion in 2025, and that challenger and specialist banks supplied 60% of it (excluding overdrafts), up from 39% in 2012 (British Business Bank, 17 March 2026). In practice, you should not rely on one high street bank. Specialist and challenger lenders are now the majority of the market, and some know acquisitions well.
Lenders look at the target’s accounts, your experience in the sector, the deposit you can put in and what security is on offer. Bank Rate was 3.75% when this page was updated, with the next decision due on 5 November 2026 (Bank of England). Rates on business loans are set by each lender, so compare offers on the total cost, not just the headline rate. For more on loan types see our guide to business loans. If the business owns its premises, a commercial mortgage may be part of the package.
It also helps to know how smaller businesses use finance day to day. The same report found that around 50% of smaller businesses used external finance in 2025, and that credit cards, overdrafts and leasing or hire purchase were the most used products in Q3 2025.
The Growth Guarantee Scheme
The Growth Guarantee Scheme (GGS) is a government-backed scheme delivered through accredited lenders. It gives the lender a 70% guarantee, which can help when a buyer has limited security. Facilities can be up to £2 million per business group, with a minimum of £25,001 for term loans and overdrafts, and £1,000 for asset finance, invoice finance and asset-based lending (British Business Bank GGS FAQs).
Three points matter to a buyer:
- You still owe the whole amount. The guarantee protects the lender, not you. The borrower remains 100% liable.
- Personal guarantees are allowed. Lenders can take them if that is their normal practice, but cannot take your principal private residence as security.
- The use is broad. A GGS facility can be used for any legitimate business purpose, including investment and growth. Whether a lender will use it for an acquisition is the lender’s decision, so ask directly.
In July 2026 the Government announced an expansion. It says the changes will add £2 billion of lending a year by 2028/29, extend the maximum term from 6 to 10 years for loans up to £1.1 million, and raise the turnover limit from £45 million to £54 million. Lenders were still to confirm roll-out dates at the time, so check the current terms with an accredited lender before you plan around them (GOV.UK, 13 July 2026).
Start Up Loans
Start Up Loans are unsecured personal loans of £500 to £25,000 at a fixed rate of 7.5% a year, repayable over 1 to 5 years. The business must have been trading for less than 5 years, and you get 12 months of free mentoring (GOV.UK; Start Up Loans). The average loan has been about £10,264. That makes them useful for buying a very small or young business, but too small for most London purchases on their own. Some guides still quote an old 6% rate, so check the official page.
Seller financing and earn-outs
Seller financing means the seller agrees to be paid part of the price later. An earn-out ties part of the price to the business hitting profit or revenue targets after the sale. Both can close a gap between what a lender will fund and what the seller wants, and both keep the seller motivated to hand over properly. They need careful drafting: agree how profit is defined, who runs the business meanwhile and what happens if targets are missed. Take legal advice before you sign.
Commercial guides differ on how much cash buyers need up front. Capitalise suggests 10% to 30% of the price, while New Owner says deposits of 10% to 50% are seen and that most deals fall at 20% to 40%. Treat those as rough guides from commercial sources, not rules: a lender will set its own requirement.
Asset finance, invoice finance and other add-ons
If the business you are buying owns vehicles, kit or a large debtor book, you may be able to finance against them. asset finance covers equipment and vehicles. invoice finance releases cash tied up in unpaid invoices, which can ease cash flow after completion. A business line of credit can give you a buffer for the first months. For larger or more complex deals, mezzanine finance can fill the gap between senior debt and equity, usually at a higher cost.
Equity and investors
You can also bring in an investor or business partner. This avoids repayments but means sharing ownership and decisions. One trap: the Seed Enterprise Investment Scheme (SEIS) is aimed at companies starting a new qualifying trade, and its rules say the money cannot be used to buy shares (apart from in a qualifying 90% subsidiary) (GOV.UK: SEIS guidance). So do not assume tax-relief schemes can fund a standard business purchase. Ask an adviser.
What a deal really costs
The price is only part of the bill. Budget for the items below before you agree a figure with the seller.
| Cost | What to know | Source |
|---|---|---|
| Stamp duty on shares | 0.5% when you buy shares in a company. A stock transfer form over £1,000 attracts Stamp Duty, rounded up to the nearest £5. Electronic transfers pay Stamp Duty Reserve Tax | GOV.UK |
| Legal fees | Contracts, warranties and the sale structure (share or asset purchase). BuyABusiness quotes solicitor costs from £2,000 to £8,000 or more | BuyABusiness (commercial) |
| Accountancy and due diligence | Checking profits, debts and tax. BuyABusiness quotes £1,500 to £5,000 or more | BuyABusiness (commercial) |
| Lender arrangement fees | BuyABusiness quotes 1% to 2% of the loan. Each lender sets its own fee | BuyABusiness (commercial) |
| Staff transfer (TUPE) | Employees usually transfer to you on their existing terms when a business changes owner, so factor their pay and notice into your plan | GOV.UK |
| Working capital and insurance | Cash for the first months after completion, plus business insurance | Your own forecast |
Step by step: from target to completion
- Set a ceiling. Work out your deposit, what you can repay each month and the personal risk you will accept.
- Shortlist targets. Use the listing sites and brokers, then check each company’s filings and charges on Companies House, which is free.
- Agree headline terms. Price, structure (shares or assets), any earn-out and what stays with the business.
- Run due diligence. Have an accountant check the profits and a solicitor check contracts, leases and staff terms.
- Approach lenders with a full pack. Include the business plan, forecasts, the target’s accounts and your own financial position. Ask about GGS and personal guarantees up front.
- Exchange and complete. Pay stamp duty where due, transfer staff under TUPE and arrange insurance from day one.
Mistakes to avoid
- Paying the headline price without checking the numbers. Profits should be proved by accounts, not by the seller’s word.
- Using one lender only. With challenger and specialist banks now supplying most SME bank lending, comparing several offers is sensible.
- Forgetting the personal guarantee. Know what you are putting on the line before you sign.
- Skipping working capital. Many buyers stretch to the price and then run short in month two.
- Leaving staff until last. TUPE rules mean existing employees’ terms usually carry over.
FAQs
What is the best way to finance buying a business in London?
There is no single best way. Most buyers combine a bank or specialist loan, some seller finance and their own deposit. The right mix depends on the price, the target’s profits and the security you can offer.
Are SBA loans available in the UK?
No. SBA loans are a United States scheme. The nearest UK equivalents are the Growth Guarantee Scheme, available through accredited lenders, and Start Up Loans for smaller amounts.
How much deposit do I need to buy a business?
It varies. Capitalise suggests 10% to 30% of the price, and New Owner says deposits of 10% to 50% occur, with most deals at 20% to 40%. These are commercial guides, and each lender sets its own requirement.
What does the Growth Guarantee Scheme actually do?
It gives an accredited lender a 70% government guarantee on the loan. You remain 100% liable, and lenders may ask for a personal guarantee but not your main home (British Business Bank).
What is the Start Up Loans interest rate?
It is a fixed 7.5% a year, for loans of £500 to £25,000 over 1 to 5 years (GOV.UK).
Do I pay stamp duty when I buy a business?
If you buy shares in a company, stamp duty is 0.5%, and Stamp Duty applies on a stock transfer form over £1,000 (GOV.UK). Asset purchases are taxed differently, so ask your adviser.
Do the staff transfer when I buy a business?
Usually yes. Under TUPE, employees generally transfer to the new owner with their existing terms (GOV.UK).
Can seller financing be combined with a bank loan?
Yes. Many deals use a bank loan for most of the price and ask the seller to defer part of it. Lenders will usually want to see how the seller’s loan ranks against theirs.
Can I use SEIS or EIS to fund a purchase?
Usually not. SEIS is for a new qualifying trade, and the money cannot be used to buy shares apart from in a qualifying 90% subsidiary (GOV.UK). Check with an adviser before relying on any tax-relief scheme.
Editor’s note: what changed in this update
On 18 October 2026 we rewrote this page for UK readers. We removed the section on US SBA loans, which do not apply here, and the unsourced benefit and drawback lists. We replaced the Pinterest images with licensed photos, and added UK schemes, current figures, a costs table and a step-by-step plan. We kept our link to the benefits of buying an established business.
Sources
- British Business Bank: Growth Guarantee Scheme FAQs; GOV.UK: Chancellor to unlock billions in finance for small businesses (13 July 2026)
- British Business Bank: Small Business Finance Markets 2025/26 press release (17 March 2026)
- GOV.UK: Business Population Estimates 2025 (2 October 2025)
- GOV.UK: Apply for a Start Up Loan; GOV.UK: Tax when you buy shares; GOV.UK: Seed Enterprise Investment Scheme; GOV.UK: Transfers and takeovers; GOV.UK: Get information about a company
- Bank of England: Bank Rate
- Commercial guides (deposit and cost ranges): Capitalise, New Owner, BuyABusiness
Author Bio
The Editorial Team at The London Report delivers well-researched and engaging content on celebrities, lifestyle and trending topics. With a focus on accuracy and clarity, the team ensures readers get reliable and up-to-date information in a simple and easy-to-understand format.
Disclaimer
This article is for general information only and is not financial, legal or tax advice. Rates, fees and scheme terms change, so check current terms with the lender or the official source and speak to a qualified adviser before you commit to a purchase.
Last updated: 18 October 2026
